21 December 2015
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Social Policy Section
The welfare state
Welfare as an administrative category
Welfare as a political category
The risk of confusion
Debates over the federal budget often
refer to the level of ‘welfare’ spending. However the term welfare is often
poorly defined. This can lead to confusion.
The ambiguity of the term ‘welfare’ is a problem across
English-speaking countries. For example, in a post on the House of Commons
Library Blog, Rod McInnes writes:
The word ‘welfare’ does not have a single universally
accepted definition in the context of public expenditure. For some people, the
word is associated with cash handouts for working-age people who are workless
or on low incomes. Others define the term more broadly to encompass other
strands of benefit expenditure, or even services provided as benefits-in-kind by
the ‘welfare state’, such as the NHS [National Health Service], social care or
free school meals. The word ‘welfare’ may also be felt by some to carry a
certain stigma, whereas others may consider it neutral rather than pejorative.
At its broadest welfare can be used to refer to all of the
programs and services that make up the welfare state. This can include health
and education, as well as income support payments such as the Age Pension,
Carer Payment, Disability Support Pension and Newstart Allowance.
Welfare can also refer to the administrative category of
‘social security and welfare’. This category is used in budget papers and
includes spending on aged care, child care, the National Disability Insurance
Scheme (NDIS), family assistance payments and income support payments.
Welfare can also refer to a much narrower (and less clearly
defined) category of spending on income support payments to people of working
age. These welfare payments are means-tested benefits provided in cash. They go
to people of working age who are not participating in paid employment or other
activities such as education or vocational training. The term welfare can be
applied loosely to spending that meets some or all of these criteria. It is a moral
or political category rather than a legal or administrative one. It is often associated
with the idea that recipients have not earned an entitlement to payments
through contributions to the community.
Use of this political category of welfare has become increasingly
common in Australian political debate. The category tends to include
unemployment payments, such as Newstart Allowance, and payments to people of
working age claiming support on the grounds of disability or single parenthood.
Statistics on welfare spending play a central role in
debates over government policy. However, in public debate it is not always
clear which category these statistics refer to. Sometimes statistics that refer
to the broad category of social security and welfare are presented as if they
referred to the narrower political category of welfare.
If public debate is to be informed by facts, commentators
need to pay close attention to the way categories such as welfare are defined.
When categories remain vague and ambiguous, the statistics can conceal as much
as they reveal.
In discussions about the welfare state the term welfare is
used very broadly to refer to government-funded services, such as education and
health, as well as means-tested payments, such as Newstart Allowance and the
Age Pension. As Luke Buckmaster from the Australian Parliamentary Library
At its broadest, welfare may refer to ‘well-being,
happiness; health and prosperity (of a person or a community et cetera)’. It
may also refer to arrangements aimed at ensuring or bringing about well-being.
Thus, a useful definition of welfare is that it is that which ‘refers to the
well-being of individuals or groups and, by implication, those measures which
can help to ensure levels of well-being through provision of education, health
services, managed housing, and social security benefits’. The term ‘welfare
state’ refers to arrangements where provision of such measures is
principally the responsibility of the state. Specifically, it refers to those
policy arrangements supporting the substantial expansion of state
responsibility for welfare in many countries following World War II. 
Governments generally do not use the broad category of
welfare state when reporting spending.
The Australian Government’s budget papers use the category
social security and welfare. It is one of 14 major categories organised
according to function. As the Department of Finance’s website explains:
Reporting by function is an internationally recognised means
of reporting government activities for comparison purposes (which can be mapped
to the IMF's Government Finance Statistics Manual 2001). It provides a
useful means of understanding government outlays as it allows for the reporting
of expenses according to their purpose.
Reporting by function rather than by program also enables
comparisons of spending over time.
According to the
2015–16 budget papers, the Australian Government will spend an estimated
$154.0 billion on social security and welfare in the 2015–16 financial year.
This represents 35.4 per cent of total government spending.
Social security and welfare includes both payments (social
security and compensation and services to groups, such as veterans, the aged,
children and families, the unemployed and people with disability.)
Table 1 provides a breakdown by beneficiary group.
Table 1: Summary of
expenses—social security and welfare
Assistance to the aged
Assistance to veterans and
Assistance to people with
Assistance to families with
Assistance to the
unemployed and the sick
Other welfare programs
Assistance for Indigenous
Total social security
‘Not elsewhere classified’
Source: Australian Government, ‘Statement 5: expenses and net capital
investment’, Budget strategy and outlook: budget paper no. 1;
2015–16, p. 5-27, accessed 17 November 2015.
Each of these categories includes both payments and
services. The four largest categories of expenditure are:
- Assistance to the aged: this category makes up 39.4
per cent of all social security and welfare spending (2015–16). The two largest
expenses in this category are income support for seniors ($44.2 billion in 2015–16)
and residential and flexible care ($10.2 billion in 2015–16).
- Assistance to families with children: this category
makes up 24.7 per cent of all social security and welfare spending (2015–16).
The largest expenses in this category are Family Tax Benefit ($20.2 billion in
2015–16), child care fee assistance ($7.3 billion in 2015–16), and parents’
income support ($5.7 billion in 2015–16).
- Assistance to people with disabilities: this
category makes up 19.2 per cent of all social security and welfare spending.
The largest expenses in this category are income support payments to people
with disability ($17.1 billion in 2015–16) and income support payments to
carers ($8.1 billion in 2015–16). This category also includes the NDIS. The
cost of the NDIS is projected to grow from $1.1 billion in 2015–16 to $19.2
billion in 2018–19.
- Assistance to the unemployed and the sick: this category
makes up 7.4 per cent of all social security and welfare spending (2015–16).
It includes income support payments to unemployed people, such as Newstart
Allowance and Youth Allowance (Other).
In the media and in political debate in Australia and
overseas, the term welfare is often used in a much more limited sense. It generally
refers to spending on means tested benefits that are provided:
as cash (or ‘near cash’)
to people of working age
to people who are capable of working
to people whose current major activity is not:
form of participation that the government is attempting to encourage (such as
The term welfare tends to be applied loosely to spending
that meets some or all of these criteria. It is a moral or political category
rather than a legal or administrative one. It appears to be associated with the
idea that recipients have not earned an entitlement to payments by paying social
insurance contributions or making some kind of contribution to the community.
In Australia, it is common for politicians and commentators
to talk about welfare payments as ‘handouts’ and payments to categories of people
who are seen as having made a contribution as ‘entitlements’. For example, this
is why Liberal Party MP, Bronwyn Bishop, has argued that means-tested payments
to veterans are not welfare:
... we in the opposition believe we have a contract with our
veterans. We say, ‘You men and women who serve our country and put your lives
on the line, we will look after you for the rest of your lives.’ That is a
contract that we make. It is not welfare. What we give to them is an
Similarly, in his first speech to the Parliament, Liberal
Party MP, Tony Abbott, argued for a new government payment to people caring for
children, which he called a ‘family wage.’ He argued that this payment would
be: ‘quite different from welfare. It is a recognition of responsibilities, not
need. It is a payment for services, not a handout.’
Another part of what shapes the political category of welfare
is the moral intuition that if a person is capable of working, it is a wrong
for them to be idle at taxpayers’ expense.
Linked to this is the idea that, aside from any financial considerations,
people are better off working than relying on income support (hence the phrase
‘the best form of welfare is a job’).
One of the negative connotations of ‘welfare’ in the
political sense is that it refers to programs that encourage passivity and
discourage work and active participation.
Many supporters of the NDIS resisted the idea that it should be seen as welfare
because the scheme is designed to enable people to participate. For example,
News Limited columnist, Tory Shepherd, insisted that the NDIS is: ‘not welfare,
it's helping people with disabilities participate in life. That means many may
be able to work, and pay taxes that may end up paying for your care when you're
old and incontinent.’
In its 2009 inquiry report on paid parental leave, the
Productivity Commission made a similar argument for paid parental leave. The
Commission suggested that the scheme should not be characterised as welfare
because it was designed to support people in their role as employees and would
facilitate workforce attachment.
Payments to people who are unable to work (people with severe
and permanent disabilities) or not expected to work (such as the aged) are often
excluded from the welfare category because participation in paid work is not
seen as a moral obligation for these groups. As David Ellwood, United States
(US) academic and former government official, writes:
It is not that Americans forget that a large share of
‘welfare’ goes to the aged and disabled. They do not consider that money to be
"welfare." Welfare, as the public uses the term ... means cash, food,
or housing assistance to healthy nonaged persons with low incomes. That kind of
welfare is what the public objects to, regardless of its size.
In public debate, the negative connotations of the term
welfare are often part of its meaning. This is especially true in the US. When
public opinion researchers survey Americans whether they favour more spending
for welfare they are much less likely to support it than if they are asked if
they favour more spending on ‘the poor’.
The administrative category social security and welfare and
the political category welfare refer to different things. However, when ‘social
security and welfare’ is abbreviated to ‘welfare’, there is a risk that the
public will become confused.
One risk is that people will see projections for increases
in the broad category of social security and welfare spending and assume that
these are driven by projected increases in the narrower political category of
welfare. Unless the category is clearly defined, people may assume that the statistics
refer to working age payments, such as Newstart Allowance and the Disability
Recent media reports and commentary increase the
likelihood of this kind of confusion. For example, in a recent media column suggesting
that ‘the national welfare bill’ is set to increase to $277 billion by 2025,
the author asserted: ‘With the Disability Support Pension payments and Newstart
Allowances set to blow out astronomically, these areas must be the first to be
reviewed and reformed.’
The projections in the column refer to the administrative
category of social security and welfare. But the column makes no reference to
spending on aged care, child care, the NDIS, carer payments, or the age
pension. By focusing on Newstart Allowance and the Disability Support Pension, the
column suggests that that the $277 billion figure refers to welfare in the
political sense. The column offers no statistics that back up the claim that
the Disability Support Pension and Newstart Allowance are ‘set to blow out astronomically.’
In contrast to such claims, a recent publication by the
Parliamentary Budget Office (PBO) shows that most of the growth in spending
within the social security and welfare category is projected to take place in
elements that are not usually seen as ‘welfare’ in the political sense.
Elements projected to grow faster than Gross Domestic Product (GDP) over the
next ten years include:
- NDIS: the NDIS is the single largest contributor to growth
in spending in the social security and welfare category, with spending of under
$1 billion in 2014–15 projected to grow to $32 billion in 2025–26. According to
the PBO’s projections, spending on the NDIS will reach 1.1 per cent of GDP in
- Child care: the second largest contributor to growth in
spending in the social security and welfare category is child care. Spending is
projected to grow from 0.4 per cent of GDP in 2014–15 to 0.7 per cent of in
- Aged care: population ageing will see demand for aged care
rise. Spending is projected to grow from 0.9 per cent to 1.1 per cent
- Carer income support: the PBO projects a strong increase
in the number of recipients of carer payments. Spending is projected to grow
from 0.5 per cent to 0.6 per cent of GDP.
Some social security and welfare spending elements are
projected to fall as a proportion of GDP. These include job seeker income
support (from 0.7 per cent to 0.5 per cent of GDP) and parenting payments (0.4
per cent to 0.3 per cent of GDP). Spending on the Disability Support Pension is
projected to be stable at 1.0 per cent of GDP.
In contrast to the impression created by the column, experts
argue that spending on the income support payments that most people think of as
welfare is not increasing rapidly. For example, according to the Australian
National University’s Peter Whiteford, Australia:
... does not have a welfare crisis. The proportion of GDP spent
on social security cash payments peaked at around 9% of GDP in 1996. It also
attained this level in 2000 when compensation for the GST was provided.
According to the most recent OECD figures, it was around 8.7% of GDP in 2013.
Similarly, as the McClure review interim report pointed out,
the percentage of the working-age population receiving income support peaked in
1997 at 24.9%, before falling to 16.6% in the 2008, rising to 17.6% in 2010
following the global financial crisis and then easing back to 16.7% in 2013.
Because the social security and welfare category is so
large and diverse, it is important to drill down into the data before drawing
conclusions about any particular element of the category.
None of the above implies that public concern about the
level of spending on working age payments, like Newstart Allowance and
Disability Support Pension, is misplaced. Australians are entitled to ask
whether more people on working age income support payments could be supporting
themselves and their families through work. However, if public debate is to be
informed by facts, there needs to be closer attention to the way categories
such as welfare are defined. When categories are vague and ambiguous,
statistics can conceal as much as they reveal.
new annual tax summary: what’s in ‘welfare’?’,
Second reading, House of Commons Library blog, 4 November 2014, accessed 27
references have been omitted from this quotation and can be viewed in the
source document: L Buckmaster, Money
for nothing? Australia in the global middle class welfare debate,
Research paper, 31, 2008–09, Parliamentary Library, Canberra, 12 May 2009,
accessed 9 December 2015, p. 3.
Australian Institute of Health and Welfare (AIHW) report Australia’s Welfare
relies on a broad category of ‘welfare system’ when reporting on spending.
See: AIHW, Australia’s
welfare 2015, AIHW, 2015, pp. 3–4.
of Finance (DoF), ‘Overview
of Commonwealth financial reporting’, DoF
website, accessed 27 November 2015.
5:expenses and net capital investment,’ Budget strategy and outlook: budget
paper no. 1; 2015–16,
p. 5-27, accessed 17 November 2015.
. Ibid., p.
pensions to veterans and their dependents are compensation payments rather than
social security payments. See: Department of Veterans’ Affairs (DVA), ‘Compensation’, DVA website, accessed 10 December 2015.
Government, op cit., p. 5-29.
Government, op cit., p. 5-31. Parents’ income support refers to Parenting
Payment Partnered and Parenting Payment Single.
Government, op cit., p. 5-30. The full implementation costs of the National Disability
Insurance Scheme are still uncertain. For more detail on how the scheme will be
funded, including the way the scheme combines Commonwealth funding and funding
from states and territories, see: T Dale and L Buckmaster, ‘Funding
the National Disability Insurance Scheme’, Budget review 2015–16, Research
paper series, 2014–15, Parliamentary Library, Canberra, May 2015, accessed
10 December 2015.
Government, op cit., p. 5-27.
. ‘New cash’
benefits include those distributed through cashless welfare cards such as the
BasicsCard used for Centrelink customers subject to income management and the
Healthy Welfare Card that will be trialled in a limited number of locations
. B Bishop, ‘Second
reading speech: Families, Housing, Community Services and Indigenous Affairs
and Other Legislation Amendment (Further 2008 Budget and Other Measures) Bill
2008’, House of Representatives, Debates, 24 September 2008, p.
8479, accessed 9 December 2015.
. T Abbott, ‘Second
reading speech: Appropriation Bill (No. 1) 1994–95’, House of
Representatives, Debates, 31 May 1994, accessed
10 December 2015.
. For an
example of how moral judgements inform thinking about income support policy,
see: P Saunders, ‘Lest
we forget the moral principle of fairness’, The Australian, 18
example, reporting on a debate within the Australian Labor Party about raising
the rate of unemployment payments, journalist Stephanie Peatling reported:
‘many Labor MPs are against an increase, saying the best form of welfare is a
job.’ S Peatling, ‘Gillard
feels pressure to lift dole’, Sydney Morning Herald, 20 May 2012, accessed
9 December 2015.
have often promoted welfare reforms by arguing that they will deal with the
problem of ‘passive welfare’. For example: J Macklin (Minister for Families,
Housing, Community Services and Indigenous Affairs), Tony
Abbott announces copycat policy on welfare reforms, media release, 28
July 2010, accessed 9 December 2015.
. T Shepherd,
isn't welfare, it's helping disabled to live’, Perth Now, 2 May
2013, accessed 10 December 2015.
Parental Leave: support for parents with newborn children, Productivity
Commission inquiry report, 47, 28 February 2009, p. 6.14
. D Ellwood, Poor
support: poverty in the American family, Basic Books, New York, 1988, p. 5.
. TW Smith, That
which we call welfare by any other name would smell sweeter: an analysis of the
impact of question wording on response patterns, GSS technical report, 55,
National Opinion Research Center (NORC), University of Chicago, July 1985,
accessed 9 December 2015; TW Smith, Trends in national
spending priorities 1973-2012, General Social Survey trend report, NORC,
University of Chicago, 8 March 2013.
. P Akerman,
up Australia’, The Daily Telegraph, 13 November 2015, p. 72.
Budget Office (PBO), 2015–16
Budget: medium-term projections, Report, 02/2015, PBO, Canberra, June
2015, Table 3–1, p. 5, accessed 9 December 2015.
. The full
implementation costs of the NDIS are still uncertain. For more detail on how
the scheme will be funded, including the way the scheme combines Commonwealth
funding and funding from states and territories, see: T Dale and L Buckmaster, op.
. PBO, op.
2015: Social services need more than short-term fixes’, The Conversation,
5 February 2015, accessed 9 December 2015.
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